C A R I B B E A N E X A M I N A T I O N S C O U N C I L

SECONDARY EDUCATION CERTIFICATE EXAMINATION®

SPECIMEN
MULTIPLE CHOICE QUESTIONS FOR

PRINCIPLES OF BUSINESS

READ THE FOLLOWING DIRECTIONS CAREFULLY.

Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item you are about
to answer and decide which choice is best.

Sample Item
The money a business receives from the sale
of goods or services is called its Sample Answer

(A) assets A B C D
(B) capital
(C) income
(D) resources

The best answer to this item is “income”, so answer space (C) has been shaded.

Copyright © 2017 Caribbean Examinations Council.

All rights reserved.
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1. A system involving the exchange of goods 5. In which department of a manufacturing

depending on the ‘double coincidence of business would an engineer MOST likely be
wants’ is known as found?

(A) barter (A) Production

(B) money (B) Personnel
(C) specialization (C) Marketing
(D) equal exchange (D) Financial

6. Which of the following responsibilities must

2. Which of the following is NOT a function of be assumed by the management of a
money? company?

(A) Indivisibility I. Producing goods of a marketable

(B) Store of value quality
(C) Measure of value II. Maximizing efficiency and creating
surpluses
(D) Medium of exchange
III. Determining dividends to be paid to
shareholders
3. A post-dated cheque is one which is dated
(A) I and II only
(A) for payment at a future date (B) I and III only
(C) II and III only
(B) no later than six months ago
(D) I, II and III
(C) to agree with the date of the
document requesting payment
7. A hotel gives vouchers for meals to its
(D) by the bank on the day the cheque
employees. This form of incentive is BEST
is presented for payment described as a

4. Which of the following practices are (A) reward

characteristic of a free economy? (B) bonus
(C) fringe benefit
I. Private ownership of assets
(D) motivation scheme
II. Central planning
III. Price-fixing
IV. Freedom of contract 8. The primary role of the Human Resource
Department of a firm is to
(A) I and III only
(B) I and IV only (A) discipline employees who breach
(C) II and III only regulations
(D) II and IV only (B) recruit, train and motivate workers
(C) seek training opportunities for
employees
(D) represent employees in industrial
relations

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9. Which of the following characteristics are 13. The purpose of a business plan is to
exemplary of a good leader?
I. measure the performance of the
I. Inspiring workers business
II. Delegating responsibilities II. attract financing for the business
III. Making intelligent decisions III. provide direction for the business
operations
(A) I and II only
(B) I and III only
(A) I and II only
(C) II and III only
(B) I and III only
(D) I, II and III
(C) II and III only
(D) I, II and III
10. An authoritarian leader is one who
14. Which of the following factors is LEAST
(A) makes decisions without
likely to affect the location of a business?
consultation
(B) allows workers to plan their own (A) Weather condition
work (B) Availability of labour
(C) consults with those likely to be (C) Suitable infrastructure
affected by the decision (D) Availability of raw material
(D) takes suggestions from employees
15. Which of the following is a regulatory issue
for the entrepreneur?
11. The workers in a large organization are
dissatisfied with the working conditions. (A) Using a credit card to transact
The trade union representatives’ first likely
business
action will be to
(B) Offering hire purchase options to
(A) have discussions with the personnel customers
officer (C) Paying national insurance to the
(B) encourage employees to adopt go- government
slow tactics (D) Advertising the business locally and
(C) encourage the workers to take strike regionally
action
(D) request a meeting with the Board of
Directors

12. A trait associated with entrepreneurs is

(A) opposition to change

(B) acceptance of loss
(C) fear of failure
(D) taking risks

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16. Which of the following pieces of 19. Which of the following ways is NOT
information should be included in a legitimate for terminating a contract?
feasibility study?

I. An overview of the business (A) Breach

II. The growth potential of the business (B) Performance
III. The profitability of the business (C) Lapse of time
(D) Change of mind
(A) I and II only
(B) I and III only
20. Which of the following describes an
(C) II and III only
essential feature of a valid contract?
(D) I, II and III

(A) The offer has been communicated to

17. Which of the following situations would the offeree.
occur if a contract for the sale of goods (B) A counter offer has been made by
becomes void? the offeree of the offeror.
(C) The offer has been accepted by the
I. The prospective buyer becomes the offeree.
owner. (D) The offer has been made in writing
II. The prospective buyer does not by the offeror.
become the owner.
III. The seller must return any money or
goods given to him by the 21. ‘Capital as a factor of production’ refers to
prospective buyer for the
transaction. (A) goods purchased for resale
(B) assets that are owned by the firm
(A) I only (C) money that is used to purchase
(B) II only goods
(D) goods that are used to produce
(C) I and III only
other goods
(D) II and III only

22. Primary production is concerned with the

18. Which of the following documents should be
used to indicate to a business department that (A) distribution of goods
supplies of certain goods are needed? (B) provision of services
(C) provision of raw materials
(D) manufacture of goods
(A) Invoice
(B) Quotation
(C) Stock card
(D) Requisition order

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23. Which of the following are features of a 27. Which of the following are functions of
cottage industry? small firms?

I. Minimal investment I. The provision of goods and services

II. Production of exports II. The offering of personalised
III. Family help services
III. The production of exclusive articles
(A) I and II only
(B) I and III only (A) I and II only
(C) II and III only (B) I and III only
(D) I, II and III (C) II and III only
(D) I, II and III

24. Which of the following is NOT a primary 28. Which of the following activities carried out
industry? in a firm will NOT be under the supervision
of the marking manager?
(A) Mining
(B) Building (A) Purchasing
(C) Fishing (B) Packaging
(D) Farming (C) Advertising
(D) Distribution
25. Which of the following actions would allow
a cigarette manufacturer vertical integration 29. Which of the following documents gives the
of business activities? name of the ship and full particulars of the
shipment of goods?
I. Buying a tobacco estate
II. Purchasing a competitor’s cigarette (A) Bill of sale
factory (B) Airway bill
III. Establishing a retail outlet for (C) Broker's bill
cigarettes (D) Bill of lading

(A) I and II only

(B) I and III only 30. Which of the following are characteristics of
(C) II and III only a ‘perfect market’?
(D) I, II and III
I. There are many buyers and sellers.
26. Which of the following LEAST affects the II. The price of the goods must be fixed
location of an industry? by supply or demand.
III. There must be several types of the
(A) Proximity to sources of raw commodity on sale.
materials
(B) Availability of an abundant labour (A) I and II only
supply
(B) I and III only
(C) Proximity to large shopping areas
(D) The presence of good roads and (C) II and III only
drainage (D) I, II and III

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31. Which of the following BEST describes the 34. A housewife buys meat from a local butcher
term 'loss leader'? in her neighborhood. What type of
distribution does this represent?
(A) An item which the retailer gives
away to customers (A) A retail outlet
(B) A product which is sold cheaply to (B) A direct channel
attract customers (C) A single channel
(C) A good which has no real market (D) An indirect channel
value
(D) A product which the retailer is
35. Advantages of supply chain operations
unable to locate
include

I. wealth creation
32. Which of the following is a MAJOR
function of consumer organizations? II. job opportunity
III. better quality life
(A) Acting as price inspectors
(B) Providing goods and services for (A) I and II only
consumers (B) I and III only
(C) Setting price controls for certain (C) II and III only
commodities (D) I,II and III
(D) Educating consumers about their
rights and privileges
36. Which of the following describes planning,
33. Which of the following BEST describes a implementation, forward and reserve flow of
bill of sale? goods and services and related information
between two destinations to satisfy
(A) An advertisement for sale of a customers’ requirement?
client's property by the bank in
settlement of a debt (A) Logistics
(B) A notice that a list of items overdue (B) Airway bill
for customs clearance will be (C) Globalization
auctioned (D) Multimodal transport
(C) A document drawn up by a business
to inform import control authorities 37. Which of the following problems are likely
of its export activities to be encountered in distribution?
(D) An agreement between buyer and
seller regarding title of ownership of I. Spoilage of goods
goods II. Inadequate warehousing
III. Ineffective communication

(A) I and II only

(B) I and III only
(C) II and III only
(D) I, II and III

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38. The link in the distribution chain that BEST 43. One of the MAJOR functions of a Central
describes the breaking of bulk goods into Bank is to
smaller packages is called
(A) make loans and advances
(A) retailer (B) accept deposit accounts
(B) consumer (C) issue notes and coins
(C) wholesaler (D) issue stocks and shares
(D) manufacturer
44. From which of the following commercial
39. A system of organizing people, activities, organizations might any member of the
information and resources involved in public be allowed to purchase shares?
moving a product or service from supplier to
customer can BEST be described as (A) Cooperatives
(B) The Central Bank
(A) logistics (C) Private companies
(B) airway bills (D) Government agency
(C) intermodal transport
(D) supply chain operations 45. Tom invests his savings by buying shares in
a company. From this investment, Tom
expects to receive
40. What is the name of the document used as
the receipt of goods by an airline carrier and (A) profits
as a contract of carriage between the shipper (B) interest
and the carrier?
(C) revenue
(D) dividends
(A) Insurance
(B) Airway bill
(C) Bill of lading 46. A plan for systematic saving and spending is
(D) Import license referred to as
(A) trading
41. Which of the following is a function of a (B) investing
commercial bank? (C) financing
(D) budgeting
(A) Refusal of deposits
(B) Barring of long-term financing 47. Governments establish National Insurance
(C) Making the various currencies Schemes in order to
(D) Lending of depositors’ funds
(A) prevent devaluation of a nation's
42. On which of the following bank accounts is currency
a service fee discharged? (B) provide benefits to employees after
retirement
(A) Current (C) provide benefits to employees
in the event of unforeseen
(B) Savings
circumstances
(C) Term deposit (D) protect employees from
(D) Fixed deposit victimization at the workplace

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48. The responsibilities of government include 52. A tax levied in excess of the standard rate on
the earned income is referred to as

I. preservation of law and order (A) surtax

II. encouragement and promotion (B) purchase tax
of investment (C) corporation tax
III. establishment of business (D) capital gains tax
enterprises
53. Government can encourage business activity
(A) I and II only by
(B) I and III only
(C) II and III only (A) reducing taxes
(D) II, III and IV only (B) reducing grants
(C) reducing spending
(D) budgeting for surplus
49. A government can protect consumers by
54. A quota can BEST be described as a
I. enacting laws
II. publishing standards (A) tariff on extraregional goods
III. prosecuting infringements (B) ban on the sale of foreign goods
(C) restriction on the quantity of goods
(A) I and II only imported
(B) I and III only (D) licence to import unlimited foreign
(C) II and III only goods
(D) I, II and III
55. The Caribbean Development Bank functions
50. Government’s deductions of part of PRIMARILY to
workers’ weekly or monthly salaries is
called (A) assist Caribbean territories in their
economic development
(A) income tax (B) assist territories engaged in large
(B) corporation tax manufacturing industries
(C) capital gains tax (C) aid territories seeking to develop
(D) value added tax their tourist trade
(D) expand communications among
the Caribbean territories
51. Which of the following can be classified as
‘direct taxation’? 56. Which of the following are MAJOR
economic problems facing many Caribbean
I. Tariff countries today?
II. Sales tax
III. Land tax I. High debt burden
II. High levels of unemployment
(A) I and II only III. Lack of capital for investment
(B) I and III only
(C) II and III only (A) I and II only
(D) I, II and III (B) I and III only
(C) II and III only
(D) I, II and III
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57. The term ‘economic dualism’ defines an 59. NAFTA is a region-wide trade agreement.
economy in which one sector Which of the following groups of countries
are members of NAFTA?
(A) imports more goods and services
than it exports (A) Caribbean, Canada, USA and the
(B) exports more goods and services United Kingdom
than its imports (B) Caribbean, Mexico, Canada and
(C) is technologically advanced while USA
the other is technologically retarded (C) Caribbean, Canada, USA and Brazil
(D) is overpopulated while the other is (D) Mexico, Canada, USA and the
underpopulated United Kingdom

58. Which of the following indices is the BEST 60. Which of the following are the MAJOR
measure of the economic growth of a arguments in favour of foreign investment?
country?
I. Reduction of local employment
(A) Population II. Establishment of markets
(B) Level of exports III. Inflow of capital
(C) Standard of living
(D) Gross domestic product (A) I and II only
(B) I and III only
(C) II and III only
(D) I, II and III

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